Author: Deep Tide TechFlow
US Stocks: PPI Shock Sparks Panic, Gloomy End to February
On Friday, one number shattered all market illusions.
The US Producer Price Index (PPI) for January surged 0.5% month-over-month (expected 0.3%), while the Core PPI skyrocketed 0.8% (expected 0.3%), 2.7 times the expectation.
The market instantly crashed.
The Dow plunged 521 points (-1.05%) to 48,978, the S&P 500 fell 0.43% to 6879, and the Nasdaq fell 0.92% to 22,668.
This was the third down day this week. On the last trading day of February, all three major indices closed in the red: The Nasdaq fell over 3% for the month, its worst monthly performance since March of last year; the S&P 500 fell nearly 1% for the month; the Dow barely held onto a 0.2% monthly gain.
The blow from inflation data completely destroyed rate cut fantasies.
The probability of a Fed rate cut in March fell further from 10% to 5%, in April from 30% to 18%, and in June from 85% to 57%. The market began pricing in "fewer rate cuts, later rate cuts," and some even began to worry: if inflation remains stubborn, could the Fed restart rate hikes?
Schwab Chief Fixed Income Strategist Collin Martin stated bluntly: "Inflation still dominates monetary policy. Given the labor market has stabilized, inflation data will be key to determining the direction of future Fed meetings."
Divergence Intensifies: Defensive Sectors Soar, Tech Stocks Crushed
The market in February told a story of a 'great rotation'.
Defensive sectors led gains:
- Utilities (XLU) surged 10% for the month, its best monthly performance since 2003
- Consumer Staples (XLP) rose 8%
- Energy sector (XLE) is up 24% year-to-date, continuing to lead
Tech stocks were routed:
- Communication Services (XLC), Technology (XLK), and Consumer Discretionary (XLY) — the three tech-heavy sectors — fell 2-4% in February
- iShares Tech Software ETF (IGV) plunged nearly 10% in February, down 23% year-to-date
- Financials (XLF) brought up the rear
The "Magnificent Seven" collectively stalled. Besides Apple barely flat, all others fell: Amazon fell nearly 1%, Microsoft and Meta fell over 2% and 1% respectively.
A famous quote from technical analysis master Ralph Acampora circulated in the market: "Sector rotation is the lifeblood of a bull market." The S&P 500 Equal Weight Index (SPXEW) rose 2.64% over the past month, while the S&P 500 fell 0.6% and the Nasdaq 100 fell 2.6%.
Amid the rubble, Dell proved with its earnings report: AI demand is real.
On Friday, Dell surged 21.9% to $148, its largest single-day gain in two years, with volume exceeding 18 million shares, double the usual amount.
This was another "AI re-rating" moment for Dell, following a 32% single-day surge in February 2024.
The earnings numbers were staggering:
Q4 Fiscal Year 2026 (ended Jan 30):
Revenue $33.4B, up +39% YoY, beating expectations by $4.6B; non-GAAP EPS $3.89, up 45% YoY, beating expectations by 10%; AI server quarterly revenue $9.0B, skyrocketing 342% YoY; Infrastructure Solutions Group revenue $19.6B, up 73% YoY.
Even crazier were the orders and backlog: Q4 AI server orders $34.1B; Fiscal Year 2026 cumulative AI server orders over $64.0B; ending AI server backlog $43.0B.
Dell Vice Chairman Jeff Clarke: "Fiscal 2026 was a defining year in our history. The AI opportunity is transforming our company. We completed over $64 billion in AI server orders, shipped over $25 billion, and entered Fiscal 2027 with a record $43 billion backlog — a powerful testament that our engineering leadership and differentiated AI solutions are winning."
Dell's surge gave the market a key signal: AI infrastructure demand is real, but the market is selective in its belief.
Nvidia's perfect earnings report led to a 5.5% drop, Dell's perfect earnings report led to a 22% surge. Both AI, why such different fates?
The answer might be: Dell's backlog ($43B) gives the market 'visibility', while Nvidia's $78B guidance is seen by the market as 'borrowing from the future'.
Crypto Market: Bitcoin Breaks Below $66,000, Ethereum Loses $2,000
On Friday, the crypto market fell alongside US stocks.
Bitcoin fell 1.97% to $65,864, briefly breaking below the $66,000 level during the session. Ethereum plunged 4.39% to $1,930, losing the psychological $2,000 level. Solana fell 4.13% to $82.13, Cardano fell 2.82%, Dogecoin fell 3.14%.
CoinDesk analyst Daniel Reis-Faria: "What you're seeing now is Bitcoin trading in sync with the broader risk market. The Nasdaq fell after Nvidia's earnings, cryptocurrencies followed. Bitcoin quickly approached $70,000, but when stock market momentum stalled, that fast money left just as quickly."
This drop looks more like a leverage washout than a structural breakdown. Hourly charts showed a broad return to green Friday morning, meaning most selling happened overnight, and buyers have quietly returned at these levels.
But the macro environment remains tough: January PPI shocker, rate cut expectations pushed further out; credit spreads widening, private equity firms plunging, credit stress worries heating up; Bitcoin is still up about 24% year-to-date, but nearly halved (~50%) from its October high of ~$126,186.
Gold & Silver: Safe-Haven Sentiment Drives Gold to $5,296, Silver Soars 19% in February
Gold surged $102 (+1.97%) to $5,296/oz, just 2% away from its late-January record closing high.
Silver "rose from the ashes" of its historic late-January crash, soaring 19% in February alone, marking its tenth consecutive monthly gain.
Copper rose just over 1% in February, just 3% from its record high, continuing to support hard asset buying.
The rebound logic for precious metals:
- Stubborn Inflation: PPI shock proves inflation is far from over, safe-haven demand rises
- Weaker Dollar: Despite high inflation, the Dollar Index weakened due to trade friction and Supreme Court overturning tariffs
- Geopolitical Tensions: US-Iran nuclear talks stall, Trump warns Iran 'time is running out'
- Credit Market Cracks: Contagion fear in private credit markets, funds rush into gold and Treasuries for safety
Today's Summary: Inflation Ghost Returns, AI Faith Begins to Waver
February 28th gave the first two months of 2026 a gloomy conclusion.
January PPI shocked, Core PPI surged 0.8%, 2.7 times expectations. Rate cut fantasies彻底破灭 (completely shattered), June rate cut probability plunged from 85% to 57%.
Nasdaq fell over 3% in February, its worst month since last March. iShares Tech Software ETF fell nearly 10% for the month, down 23% year-to-date. The Magnificent Seven collectively stalled, only Dell surged 22% thanks to its $43B AI server backlog, becoming the lone hero in the rubble.
Block laying off 50%, CoreWeave plunging 20%, financial stocks crashing on private credit panic — "AI replacing jobs" anxiety and "credit contagion" panic spread simultaneously.
Bitcoin broke below $66,000, Ethereum lost $2,000, the crypto market fell alongside risk assets.
Gold surged to $5,296, silver soared 19% in February, safe-haven sentiment pushed precious metals back to highs.
The market is asking one question: Is inflation a temporary blip, or is it making a comeback?
If the answer is the latter, then the Fed not only won't cut rates, it might even be forced to hike again. For tech stocks with high valuations, cryptocurrencies with high leverage, and risk assets reliant on liquidity, this is a nightmare.
Dell proved the reality of AI demand with its $43B backlog, but the market no longer unconditionally believes the "AI story" — it wants to see profits, see ROI, see if this $700B cloud giant capital expenditure can truly translate into shareholder returns.
February is over, but the inflation nightmare has just begun.
